State Bank of Indore: Caught in the Act

The nation today was exposed to the information from nothing less than the Ministry of Information and Broadcasting, or, as they say, straight from the horse’s mouth: “SBI is facing a situation where most of its branches and those of State Bank of Indore are competing for the same business, in the same market, under the same brand. This has prevented SBI from fully exploiting its brand equity for driving business growth”.

Hence, “the Cabinet gave its nod to the merger of State Bank of Indore with SBI. Acquisition of State Bank of Indore by SBI would allow economies of scale in terms of footprint, manpower and other resources.”

Never heard such candid and succinct diagnosis of a ‘situation’ from Oracles of New Delhi before! Remedy advised though failed to impress my weak mind. If internecine competition is indeed a ‘situation’ with the State Bank Group, the mighty wizards have successfully knocked off the tip of the iceberg by merging State Bank of Indore, and State Bank of Saurastra, earlier. What lies beneath, however, is a massive residue of five more State Banks, namely, the Bikaner & Jaipur, Hyderabad, Mysore, Patiala and Travancore. I am sure, by the same token, they may cause discomfort not only to SBI, but among themselves too. Ironically, the group is also facing a shortage of human resources that can be easily pooled for the common cause.

I have long given up writing, nay, thinking, on merger of Associate Banks. But the sudden flash in the pan plucked me long enough from the blinkered drudgery of life to nod my head in approval. It’s kind of reminiscent of Spain’s goal against Netherlands in the 116th minute of the World Cup final when almost everyone had given up on Paul’s prophecy.

So long folks, till the Octopus catches another associate competing with the SBI!

4 thoughts on “State Bank of Indore: Caught in the Act”

Good observation. But in the same vein, why have so many nationalised banks(PNB, UCO………) and create confusion. why not merge all of them. May be that way they could be a force to reckon with against the onslaught of private banks.

Several years back when many Nationalized banks were in red because of huge NPA there was a move to merge weak banks with 5 strong ones however over a period of time, those banks had ‘turn around’ and saved from merger.

You appear to have no clue to the entire issue. As a matter of fact, none of the 5 remaining associate banks is a weak bank, leave alone being in red. Merger of Associate Banks cannot and should not be equated with the merger of weak banks with the stronger entities in the market. As the Chairman of the State Bank Group had expressed earlier, it would rather be a reorganization of business resulting in optimal utilization of resources, improved efficiency and economies of scale. It would also cut out the dysfunctional redundancy in the system, manifest in a plethora of overlapping branches.

Therefore, your logic of weak banks turning around in the ensuing years is just not applicable to the case in question. Furthermore, you have obviously not cared to check out the facts leading to the turnaround of the ‘weak banks’ either. The Government of India, meaning the tax payers, had to pour billions of rupees into the ‘weak banks’ before they could even think of turning around. Even so, some of them are still bobbing up and down and a few may indeed sink, but for the ultimate support.

It appears you visualize merger as a deadly snake. Remember, however, but for this snake, employees of erstwhile Bank of Rajasthan would have been in dire straits today. Also remember not to hold the wrong end of the argument, or the snake, if you must have to. You may have a hell to pay if it turns around.